I'm trying to download the X-Plane 10 Demo through uTorrent, however I get a "too many open files" error all the time. I can do the alternate download (which takes forever and a day), but I wonder how I can increase the setting in Lion?

I found conflicting information about it, some say that ulimit -n and sysctl are the tools of choice, while others report that launchctl is correct.

you can set a custom ulimit within /etc/profile, or
~/.profile ; while this isn't required I've provided an example

Be cautious when setting any of these values to a very high number when compared with their default - the features exist stability/security. I've taken these example numbers that I believe to be reasonable, written on other websites.

When launchctl limits are lower than the sysctl ones, there have been reports that the relevent sysctl ones will be bumped up automatically to meet the requirements.